Tax Reform Finds A Fight Back Home Many Constituents Cite Ira, Pension Changes

September 10, 1986|By John F. Persinos of The Sentinel Staff

WASHINGTON — Congressmen say the political hinterlands are buzzing with discontent over the proposed tax-reform bill, dispelling the common assumption that Middle America has embraced the bill as its salvation.

Lawmakers, recently back from a three-week vacation, still predict the tax bill will be enacted later this month. But many report that constituent reaction during the recess was unexpectedly hostile, meaning the bill could lose momentum and encounter some rough sledding. Tax writers are expected to finish the bill and submit it to the House by Friday or early next week. Rep. Bill McCollum, R-Orlando, said he was deluged with 200 calls and letters from people in his district during the three-week break. The bulk of the complaints, he said, came from individuals upset with the bill's curbs on deductions for individual retirement accounts.

''The IRA changes, in particular, are unpopular and very controversial,'' said Rep. McCollum. ''I heard a lot of concern, and I share that concern. Some of us would have liked changes that were less strict. But it wasn't possible, and it isn't possible now.''

Jim Jaffe, a staff member of the House Ways and Means Committee, said the recent groundswell of unhappiness among voters will probably embolden the handful of conservative congressmen who oppose the bill on grounds that it is anti-business. But, Jaffe said, ''I can't foresee anything that could realistically defeat the bill.''

The bill has been ballyhooed by President Reagan and many in Congress as a boon to middle-income taxpayers and a clampdown on business. The Joint Committee on Taxation estimates that the bill would raise $120 billion more in taxes from businesses over the next five years, and reduce individual taxes by the same amount.

Joe Minarik, senior research analyst with the Urban Institute, a think tank that specializes in domestic policy issues, said, ''All the figures I have seem to indicate that the majority of middle-income wage earners -- those making $50,000 and under -- will get a tax cut.''

But, McCollum said, ''The term 'middle income' is a subjective thing. A two wage-earner couple that is accustomed to taking a lot of deductions will probably see their tax bill go up next year.''

Nevertheless, McCollum emphasized that the bill is basically a good one. ''It still benefits the majority,'' he said. ''I'm going to vote for it.''

Flora Sullivan, a tax specialist with the office of Rep. Sam Gibbons, D- Tampa, said Gibbons recently received ''at least a hundred phone calls and letters'' from middle-income wage earners who are plugging the bill's numbers into hypothetical tax forms and coming up with little or nothing in tax savings.

But the biggest hue and cry, she said, concerns a provision that adversely affects retirees -- a key constituency in Florida.

Sullivan said the tax-reform bill would eliminate, as of July 1, 1986, the so-called ''recovery'' rule for retirees who have contributed to their own pension funds. The rule, in essence, allows them to recover those contributions -- which have been previously taxed as part of their income -- without having to pay an additional tax on withdrawal.

''The provision on recovery rules is really unfair, because it retroactively hurts retired people,'' said Sullivan.

But, Sullivan acknowledged, ''The individual side of the bill is written in concrete.'' She said any fight to preserve the recovery rule, or even to delay the pension tax change, would be a losing one.